Positive fundamentals buoyed both LME and SHFE aluminium yesterday; likely to trade higher today

The US dollar rebounded on Wednesday as investors digested testimonies from the lead US trade negotiator with China and the top ranking Federal Reserve official. LME base metals traded higher across the board on Wednesday and aluminium gained 0.3%. SHFE base metals performed similarly overnight and aluminium rose some 0.2%.

LME aluminium cash contract closed higher from previous day at US$ 1898.5 per tonne during the day’s closing yesterday but lost some gains during night trading.  As longs loaded up their positions, the three-month LME aluminium rose a three-week high of US$1,930 per tonne on Wednesday, before it ended at US$1,922 per tonne, standing above all short-term moving averages. The rebound in the US dollar index accounted for the losses in LME aluminium later in the overnight session. New market talks of headwinds against the full production recovery of Hydro’s Alunorte alumina refinery in Brazil is likely to buoy LME aluminium today, which is expected to trade at US$1,910-1,940 per tonne.

As on February 27, LME aluminium cash (bid) price stood at US$ 1898 per tonne, LME official settlement price stands at US$ 1898.50 per tonne; 3-months bid price stands at US$ 1921 per tonne, 3-months offer price is US$ 1921.50 per tonne; Dec 19 bid price stands at US$ 2055 per tonne, and Dec 19 offer price stands at US$ 2060 per tonne.  

The LME aluminium opening stock decreased to 1224075 tonnes. Live Warrants totalled at 642350 tonnes, and Cancelled Warrants were 581725 tonnes.

LME aluminium 3-months Asian Reference Price is hovering at US$ 1915 per tonne.

SME and SHFE Aluminium Price Trend

The benchmark aluminium price on Shanghai Metal Exchange slightly increased to US$ 2053 per tonne today from US$ 2049 per tonne on February 27. 

Limited buoyance from fundamentals ceased increase of the SHFE 1905 contract (May aluminium contract) at RMB 13,735 per tonne at noon yesterday. The contract fell below the daily moving average in the afternoon, and closed lower for the second consecutive trading day, at RMB 13,690 per tonne. This remained above all moving averages. The most liquid SHFE 1905 contract then hovered in a wide range and ended higher at RMB 13,720 per tonne overnight. It is expected to trade at RMB 13,650-13,800 per tonne today. Spot discounts are seen at RMB 90-50 per tonne against the SHFE 1903 contract.

As consumption is yet to completely recover, a lack of confidence in longs is likely to see the contract around 60-day moving average and keep it above RMB 13,600 per tonne level tonight.